A string of bankruptcies at German department stores, soaring interest rates in the United States, a real estate crisis in China...In recent weeks, worrying signs for the global economy's health have been piling up. "Business insolvencies are on the rise everywhere; they have already exceeded their 2019 levels in the United Kingdom, Canada, and Sweden," said Bruno de Moura Fernandes, an economist with French credit insurer COFACE. World trade has entered a recession – down 0.7% in the first quarter – and geopolitical risks continue to take a toll on economic activity. "There is no real disaster," according to Charles-Henri Colombier, an economist with Rexecode. "But the outlook is gloomy, and the economy is likely to show persistent weakness over the second half of the year."

At the start of 2023, major concerns linked to the energy crisis had rapidly vanished, giving way to a partly excessive optimism: Europe could do without Russian gas, China was finally reopening its economy, and tourism was back on its feet. "But manufacturing and business climate indicators turned out to be rather poor, and we're now back to measured pessimism," said Hélène Baudchon, an economist at BNP Paribas.

This is particularly true of the eurozone. Although the French and Spanish economies held up surprisingly well in the second quarter – with GDP growth of 0.5% and 0.4% respectively – while Germany stagnated (0%), the coming months are expected to prove trickier. "The tightening of monetary policy is beginning to weigh on activity: The cost of credit is rising, particularly for businesses," Riccardo Marcelli Fabiani, an economist at Oxford Economics, said. In July, the Purchasing Managers' Index (PMI), which reflects managers' sentiment of business conditions, dropped to 47 – above 50 shows expansion, below is contraction – in the monetary union, its lowest level since November 2020, raising fears of a slowdown.

In June, industrial production was still up by 0.5%. However, by removing the figures for Ireland (+13.1%), artificially inflated by the presence of multinationals on its soil, production dropped by 0.9%. "This is all the more worrying as the slowdown is beginning to spread to services, which had been holding up rather well until now," said Anna Titareva, an economist at UBS.

Capital Economics calculated that tourism boosted eurozone growth by 0.3 points over the first half of 2023. But European economies will no longer be able to count on this contribution in the second half as the sector has returned to its pre-Covid-19 levels.

You have 55.64% of this article left to read. The rest is for subscribers only.